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Bollinger Bands


Developed by John Bollinger, Bollinger Bands are considered some of the most useful bands in technical analysis, for they vary in distance from the moving average of a Forex Market Price based on the security's volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass the majority of a Forex Market Price action.

 

  1. A simple moving average in the middle
  2. An upper band (SMA plus 2 standard deviations)
  3. A lower band (SMA minus 2 standard deviations)

During periods of increased fluctuation, the bands widen to take this into account, and when the fluctuation decreases, the bands are tapered for a narrower focus to the price range. The upper band is the standard deviation multiplied by a given factor above the simple moving average, and the lower band is the standard deviation multiplied by the same given factor below the simple moving average.


How to use?

 

In addition to identifying relative price levels and volatility, Bollinger Bands can be combined with price action and other indicators to generate signals and foreshadow significant moves.

 

Example:

You can use this technique for any currency at 1H or 30M time frame. We have to use 14 EMA (Green Line), 21 EMA (Red Line), 50 EMA (Blue Line) , Bollinger Band (20, 2) (Brown and Yellow Lines).

 

Entry Rules for Short: if 14 EMA (Green Line) is below 21 EMA, then if both 14 EMA (Green Line) and 21 EMA (Red Line) are below 50 EMA (Blue Line), then if 50 EMA (Blue Line) is within the Bollinger Bands borders (Brown and Yellow Lines).

 

Entry Rules for Long: BUY if 14 EMA (Green Line) is above 21 EMA (Red Line), then if both 14 EMA (Green Line) and 21 EMA (Red Line) are above 50 EMA (Blue Line), then if 50 EMA (Blue Line) is within the Bollinger Bands borders (Brown and Yellow Lines).

 

Exit rules: Exit when any of the conditions is violated.

 

bollinger bands

 

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Forex Indicators

Average Directional Movement Index

Moving Average Convergence/Divergence (MACD)

Stochastic Oscillator

Relative Strength Indicator (RSI)

Moving Average

Bollinger Bands

Fibonacci Indicator

 

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